In a ruling posted to its website late Friday, the regulator gave its blessing to the pipeline giant to change its routing methodology in a 2.3-kilometre stretch of construction in B.C.’s Fraser Valley.
Trans Mountain’s engineers had initially applied to the regulator to dig a 36-inch pipe through a stretch of mountainous terrain near Hope, B.C. However, the company later discovered that hard rock formations would make boring through a pipe that wide very challenging.
Last fall, the company applied to the regulator to reduce the pipe size to 30 inches, a move its engineers said would not impede the flow of oil gushing through the pipeline.
The regulator, for its part, initially rejected that application, citing unconvincing evidence from the company that the alteration would ensure the integrity of the pipe and the oil flowing through it.
“The Commission of the Canada Energy Regulator has determined that Trans Mountain did not adequately address concerns about pipeline integrity and related environmental protection impacts,” the regulator cited in its reasons for rejecting the application.
This prompted Trans Mountain to issue a particularly stern warning – that refusing to grant it permission to drill a smaller pipe would lead to a “catastrophic” two-year delay and billions of losses as a result.
On Friday, Trans Mountain’s lawyer, Sander Duncanson, appeared at a hearing before the Canadian Energy Regulator in Calgary to argue that the company had taken all the necessary steps to ensure that the pipe size variance would be safe and built to stringent standards.
“The commission must be mindful that every day counts now,” Duncanson told the commissioners.
Upon hearing reassurances from Trans Mountain, the regulator agreed with the company’s second, updated application.
The Commission of the #CER has approved Trans Mountain’s variance application with conditions: https://t.co/OOFJF0pCOm. The reasons for the decision will be released in the coming weeks. Trans Mountain can now use 30-inch pipe for the 2.3-km section near the Fraser River in B.C. pic.twitter.com/gpzAJ3FSJ5
The pipeline, purchased for $4.7 billion from a Texas energy giant by Justin Trudeau’s Liberal government in 2018, has incurred an additional $31 billion in construction costs. This puts the current overall cost of the project’s acquisition and construction at $35 billion.
Last month, on the Friday before Christmas, an additional $2 billion in commercial loan guarantees was announced on Export Development Canada’s website. This loan guarantee pushes the total amount of government-backed loans provided to Trans Mountain by a group of Canadian banks up to $18 billion.
Robyn Allan, an independent economist whose decade-long costing calculations have demonstrated remarkable accuracy, told Global News the additional $2 billion in loan guarantees was because Trans Mountain knew it needed more money, beyond the $35 billion already incurred to acquire and build the project, to get the job done.
“They know they’re not going to have enough to get them through now, they went out and borrowed another $2 billion,” she said.
The feds have backstopped other major infrastructure projects in Canada to the tune of billions. For example, Ottawa gave the massively over-budget Lower Churchill Hydroelectric project in Labrador loan guarantees on $9.2 billion in bond debt borrowed from 2013 to 2017, debt which is still owing.
But Trans Mountain’s case is precarious, Allan and other experts Global News spoke with say, because the company will only be able to pay off the debts with tolls, or fees, it charges shippers to pump oil through the line. And, as it stands, the fees currently approved to be charged to those oil companies will only cover about half the cost of the pipeline.
Pipeline Prospects
Not all analysts are sour on the pipeline’s prospects.
Last June, Bank of Nova Scotia analyst Robert Hope published a report estimating that Trans Mountain might generate a profit (before interest and taxes) of $2.4 billion in 2025 and $2.6 billion in 2026 as oil starts gushing from Alberta to an ocean port in Burnaby, B.C.
The analyst suggested Trans Mountain was worth $26 to $29 billion.
Stephen Ellis, a strategist with Morningstar, a financial services firm, believes the line is “very much needed” to move Canadian crude to tidewater. But, he estimates the pipeline’s maximum value at no more than $15 billion.
This, Ellis says, means a massive write-off from the federal government is in the cards — which, ultimately, would be borne by Canadian taxpayers.
“If this were a private firm,” he told Global News, “we […] would not necessarily be in the situation that we are now because I doubt that a private firm would have underwritten this level of valuation and this level of financial spending.”
Circuitous, costly road for Trans Mountain
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Trans Mountain has cited a number of reasons, from supply chain challenges and soaring inflation to less productive rookie, “green-hand” labourers and unforeseen weather events, as reasons behind the massive cost overruns.
On Friday, the energy regulator’s commissioners alluded to the fact that it’s taken a decade, and billions in unforeseen construction costs, to get the job done.
But the pipeline company’s lawyer, Duncanson, cited the complexity of building an 1,100-kilometre pipeline as a reason for the “unforeseen” events.
Nonetheless, the expansion project’s final price tag will almost certainly be more than $35 billion — once the final construction bill, and debt servicing costs, which Allan estimates in the range of $2 billion a year once oil starts following, are taken into account.
In April 2022, Ottawa agreed to defer the interest payments on Trans Mountain’s debt so that the company could stay solvent and finish the job. In accounting terms, this is known as “interest in kind.”
But once the loan terms are up in August 2025, incidentally, just weeks before an anticipated federal election, that interest debt will need to be paid back, in addition to the $31 billion in construction loans.
“As soon as that project’s operating, they can no longer [defer the interest],” Allan says.
“So that $2 billion in interest [costs] we’re talking about will have to become an expense.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
